31 October 2024
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The budget has been described by many experts as significant and transformative. Many important points were announced, including changes to National Insurance, taxes, and the minimum wage. A key point for our sector is that low-income households and renters will be able to receive up to £30,000 each for home improvements starting next year, with a £3.4 billion cash pot earmarked in the budget.
In an article by Sam Barker in the Daily Mail, it was stated that the money will go towards the Warm Homes Plan, a Government manifesto initiative to improve the properties of low-income homeowners and private tenants in homes with EPC ratings of D to G to at least C.
The Chancellor Rachel Reeves said the £3.4billion would be spent from 2025 until 2028. The Warm Homes Plan aims to upgrade 5 million houses.
Each eligible home can access £15,000 for energy performance improvements and an additional £15,000 to install low-carbon heating, such as heat pumps.
Homeowners and tenants will not have to pay any of their own cash to upgrade their homes in this way.
However, landlords will get one home's upgrades paid for under the scheme, then contribute to paying 50 percent of the cost of improving each extra home.
The £3.4billion figure also includes £1.8billion for fuel poverty schemes proposed to help more than 225,000 households cut energy bills by over £200 a year.
Budget documents said: 'The Warm Homes Plan will transform homes across the country by making them cleaner and cheaper to run, from installing new insulation to rolling out solar and heat pumps.'
The cash will be given to local authorities, who will then distribute it in their areas through grants.
These grants can be spent on energy performance upgrades and low carbon heating for English homes.
The Government also promised to increase funding for the Boiler Upgrade Scheme in England and Wales this year and next, following 'high demand'. The Boiler Upgrade Scheme provides grants worth up to £7,500 towards replacing older boilers with more modern, greener heat pumps.
In response to the budget, we have received feedback from numerous influential associations and businesses, including the Building Cost Information Service (BCIS), Daikin, the Heat Pump Association (HPA), Wates Group, the Chartered Institute for Plumbing and Heating Engineering (CIPHE), the British Electrotechnical and Allied Manufacturers Association (BEAMA), and Mitsubishi Electric.
Dr David Crosthwaite, Chief Economist at BCIS, said: “Reeves announced £100 billion in capital spending over the next five years with the mantra “invest, invest, invest” but I’m not convinced this is a budget for growth.
“There are conflicting announcements, and as it stands the investment outlined in the Budget is unlikely to make a material difference to the construction sector and “get Britain building again” - a stated aim of the Government.
“I was hoping for something a little more radical, but perhaps that will come in the Spending Review next spring.
“We really need the Government to invest in fixed capital programmes that will actually “get Britain building again” and drive wider economic growth. Four months in and this feels like a missed opportunity for the new Government.
“The Government did announce spending on construction projects, such as schools, social housing, and transport to name a few.
“However, it still remains unclear how the Government intends to meet its self-imposed target of building 1.5 million homes over the life of the Parliament, without tackling the existing skills shortage.
“The resurrection of the HS2 link from Old Oak Common to Euston is a positive move, but we need more commitment to other infrastructure projects in the pipeline with the Lower Thames Crossing project a prime example.”
Steve Molloy, Daikin’s Sustainability and Commercial Solutions Manager, stated:
Public Sector Decarbonisation Scheme: “Committing over £1 billion to the Public Sector Decarbonisation Scheme, is a positive step for UK Net Zero. Heat Pumps will play a key role as an alternative to fossil fuels. Making them more affordable will help the public sector play its role in the nation’s greener future.”
Warm Homes Plan: “We welcome the Chancellor’s commitment to provide £3.4 billion to fund low-carbon heating and to improve household energy efficiency. The decision to increase funding for the Boiler Upgrade Scheme will help thousands of households decarbonise their home heating over the next three years. We look forward to working with the Government to deliver their Warm Homes Plan.”
www.daikin.co.uk/en_gb/residential.html
Charlotte Lee, Chief Executive of the HPA, said: “Given the challenging economic climate, it’s promising to see an initial commitment of £3.4bn towards heat decarbonisation and household energy efficiency over the next three years, as well as an increase in funding for the Boiler Upgrade Scheme for the next two years. However, more needs to be done to support the acceleration of the electrification of heat if the UK is to stay on track and meet the carbon emission reduction targets in line with the legal obligations. We therefore await the details of Phase 2 of the Spending Review with interest.”
Eoghan O’Lionaird, Chief Executive Officer, Wates Group, said: “We are pleased to see announcements in today’s Budget that outline positive steps to ensure our nation’s homes are fit for the future. At Wates, our purpose is to reimagine places for people to thrive, and so we welcome confirmation of £3.4bn for the Warm Homes Plan, the additional £500 million for the Affordable Homes Programme, and the consultation on a five-year rent settlement for social housing. In addition to these positive moves to address the UK’s housing crisis, we are also happy to see commitment to a 10-year infrastructure roadmap set out today, which we know will play a crucial role in unlocking Government projects for years to come. As one of the UK’s leading school builders, we were also encouraged by the Government’s significant £1.4bn boost in funding to rebuild schools across the country. We stand ready to turn these commitments into action and look forward to continuing to work as a strategic partner to Government to ensure we deliver on the promise of creating thriving communities up and down the country.”
www.wates.co.uk
Kevin Wellman, Chief Executive officer at the CIPHE said: “The announcement today for greater funding into apprenticeships and our education system is very welcome news. The UK is at a critical turning point in our history where we need to ensure our workforce is being trained for the jobs of the future, whether that is in sustainability and efficiency or digital and tech.
“At the CIPHE, we are dedicated to ensuring the workforce has the skills they need to do the job competently and effectively. As such, we are developing a new qualification, which has the backing of multiple government departments and industry representatives, that will create additional career entry points for those starting out in their career.
“For our sector, as with any in the built environment adapting to more stringent standards that deliver system requirements that futureproof our homes and infrastructure is critical.”
Yselkla Farmer, CEO of BEAMA, the UK trade association for energy infrastructure and systems, said: "The Chancellor’s budget has stepped up urgently needed investment tackling the UK’s key decarbonisation heating and transport challenges. Reaffirming the £3.4bn Warm Homes Plan investment is positive but it is essential the Government fleshes out the practical details of its approach with cost-effective, impactful measures such as on heating controls and improving indoor air quality to protect health.
"Incentivising EV uptake for company cars through tax relief is positive for decarbonising transport and alongside the £2bn for UK EV manufacturing will boost this vital sector. However, the freezing of fuel duty continues to send mixed messages to motorists.
"Making big investment pledges sends a valuable political signal but the Government urgently needs to grasp the nettle on trickier details that will drive decarbonisation in people’s lives and bring long term financial and quality of life benefits. The UK’s £14bn turnover Net Zero supply chain is ready to support this but needs a more ambitious policy and regulatory framework to match these financial signals.
"The commitment to 1.5 million new homes is encouraging, but immediate clarity is needed on the Future Homes Standards is crucial so that developers and housebuilders, especially SME housebuilders, can cost and plan accordingly for future much needed housing developments."
John Hutton, the former cabinet minister who now chairs the Association of Infrastructure Investors in Public Private Partnerships, said: “The Chancellor’s commitment to public investment in new infrastructure is to be welcomed. However, it will be impossible to get the scale of investment needed to get Britain building again without private financing. The UK is one of the only countries in the developed world that doesn’t use public private partnerships to build new schools, hospitals and transport. We need a modern partnership between the private and public sectors that addresses the issues of the past if we’re avoid another lost decade of British infrastructure.”
Richard Steer, the Chair of Gleeds Worldwide, said: “This was a budget designed to put election rhetoric into economic strategy and having had more leaks than the Manchester United defence, there were few surprises. Our sector is one of the largest employers’, and hikes in Nat Insurance and increases in Labour costs are going to dampen the appetite for recruitment in an industry that already needs to employ just under 251,500 workers by 2028 to just stand still. Funding for bringing HS2 to London was sensible and I wait to see details on refurb plans for the Schools, Roads and Health. But the budget did little to persuade me that they treat our challenges on training, retention, planning reform and meeting net zero targets with any more seriousness than the last government. Finally it is worth noting that Aerospace and Car manufacturing sectors were supported with funding by the Chancellor. Construction has a greater impact on the economy than both these sectors combined.”
Russell Dean, Deputy Divisional Manager, Living Environmental Systems at Mitsubishi Electric, said: “Decarbonising the built environment is vital for the UK to reach its ambitious goal of net-zero carbon by 2050, and changing how we heat the UK's housing stock will be instrumental in this. This Budget was the new Labour government's opportunity to demonstrate its commitment to clean energy and decarbonisation, and the investment into Great British Energy and the Warm Homes Plan is a welcome step. But we urge the government to go further in outlining a clear, long-term strategy to reach net-zero.
"The government’s commitment to building 1.5 million new homes is welcome, but these new homes must be future-proofed, through initiatives like the Future Homes Standard, and not need retrofitting in just a few years as standards change. We must also do more to convey urgency around the need for house builders to prioritise renewables now.
"We also call for a rebalancing of electricity levies or the decoupling of the price of electricity and gas, to bring down the price of electricity and make all-important renewable technologies, like heat pumps, a more affordable option for homeowners.”
https://les.mitsubishielectric.co.uk
Gav Murray, Hive Heating Director at Centrica New Business Net Zero, said: "An uplift in applications for September, following a record year for heat pump installations so far, reaffirms that more homeowners than ever are recognising the substantial benefits of upgrading to greener heating systems.
“The government's announcement of additional funding for the upgrade scheme will help to alleviate concerns that support for households was set to be reduced. Industry leaders must now work together to capitalise on this and ensure the workforce has the skills to convince would-be adopters and deliver on rolling out the technology to more homes across the country.”
www.centrica.com
Fiona Hodgson, Chief Executive, Scottish and Northern Ireland Plumbing Employers' Federation (SNIPEF) explained that the new employer tax increase threatens the stability of plumbing and heating industry, jeopardising investment and job creation in an already fragile construction sector.
Chancellor Rachel Reeves's announcement of a rise in employer National Insurance from 13.8% to 15%, alongside a lowered threshold for NI payments, has drawn strong criticism from the UK's plumbing and heating industry.
Although the increase in Employment Allowance from £5,000 to £10,500 will provide some relief for small businesses, the SNIPEF warns that the broader impact of these changes will place additional strain on an already struggling construction sector. This could threaten current jobs, limit new job creation and obstruct crucial investments in skills and productivity.
Fiona said: "The plumbing and heating industry is experiencing steady demand, but ongoing challenges, from rising material and labour costs to frequent payment delays, are destabilising our members' ability to thrive and grow.
"While we welcome the Employment Allowance increase for the smallest employers, this increase in employer National Insurance, particularly with a lowered threshold, severely limits crucial investments in equipment, training, and development, the very goals Labour's manifesto pledged to support."
SNIPEF’s soon-to-be-published State of Trade survey indicates that while 81% of members remain confident in their industry's strength, only 32% feel optimistic about the broader UK economy.
"Our members are committed to supporting their communities and delivering high-quality services," Hodgson continued. "But with rising costs, payment delays and now this added tax burden, any potential for business growth is under threat. We urge the Government to reconsider its approach, as imposing these taxes now only increases pressure on an already fragile construction sector."
The recent liquidations of major construction firms, including ISG and housebuilder Stewart Milne, underscore the sector's vulnerability. "Clients are demanding price reductions while supply chain costs are climbing," Hodgson noted. "This squeeze on margins is increasing the risk of further liquidations."
SNIPEF argues that further tax hikes on small businesses won't boost productivity but will instead drain resources that could be used for training, innovation, and job creation. "This isn't support for industry; it's a hindrance," Hodgson added. "We need smart, supportive policies that empower small businesses, not blanket tax measures that sap their potential. The government should be looking to incentivise growth, not curtail it."
SNIPEF calls on the government to consider alternative solutions, such as further support and incentives for training and professional development, which would allow small businesses to continue delivering essential services without compromising growth and innovation.
Recent insights from the Institute for Fiscal Studies support SNIPEF's concerns, highlighting that additional taxation on companies can weaken their ability to invest in productivity and workforce development, both crucial for economic recovery and long-term growth.
https://snipef.org
Mark Wilkins, Technology & Solutions Portfolio Director at Vaillant, comments: “Vaillant welcomes the government’s first step to support the Warm Homes Plan, allocating £3.4bn over the next three years, as well as an increase to the Boiler Upgrade Scheme funding. This demonstrates that heat decarbonisation is front and centre in the new Labour government’s agenda. However, to deliver the Warm Homes Plan, the availability of sufficient numbers of professional installers armed with the skills to deliver low carbon heating such as heat pumps is critical.
“Currently there is a significant imbalance in the heating sector’s workforce. It has approximately 150,000 registered gas engineers, compared to just 4,500 qualified heat pump businesses in the UK. This disparity must be addressed, and the skills gap closed, quickly. Whilst the details are still to emerge, the £40m investment into the Growth & Skills Levy outlined yesterday appears to deliver such flexibility, and we welcome the opportunity to work with Skills England to ensure the heating sector has access to the skills required to achieve the decarbonisation of home heating.
“The transition to a low carbon heating future is exciting. But it requires long-term thinking, planning, and support from government to ensure it is a success.”
www.vaillant.co.uk
Paul Smith, MD for NIBE says: “The budget featured some positives for the heat pump sector, including an increase in funding for the Boiler Upgrade Scheme for the next two years, announced earlier this month, and support to grow the heat pump manufacturing supply chain. Even with these positives, we are still way behind the rest of Europe when it comes to heat pumps and we echo the sentiment of the Heat Pump Association – more needs to be done to accelerate the electrification of heat if we are going to meet our legally binding net zero targets.
“Overall, it is crucial that UK homes become more efficient, to help reduce energy bills and ensure people are warm. Fuel poverty is a very real issue for many, and I was pleased to see an initial commitment to the Warm Homes Plan, with £3.4bn set aside over the next three years to decarbonise and improve the efficiency of existing housing stock and a pledge to build 1.5 million more homes. Heat pumps and other renewables are included this plan, helping to make low carbon technologies accessible for all. However, I would encourage our government to ensure that plans for the introduction of The Future Homes & Buildings Standards due in 2025 are seen through without delay.
“It’s time to pick up the pace in our transition from fossil fuels, I hope to see more focus on the ways we can achieve this in the years ahead as the first significant net zero milestones loom.”
www.nibe.eu
